Making A (Yearly) Splash: How Coca-Cola Japan Stays Ahead in One of the Most Innovative Beverage Markets in the World

According to Khalil Younes, executive vice president of marketing and new businesses at Coca-Cola Japan, this is applied to everything in Japan - self-perfection, agriculturally, industrially, to everything.

“It applies, obviously, to products,” Khalil said. “It’s not acceptable in Japan to have a product that doesn’t evolve and get more perfect.”

This makes for a very keen consumer. In a market saturated with products and media, Japanese people intentionally seek out products that have made some sort of improvement on the last beverage that made a splash, whether it be in flavour, health benefits or even the way it’s advertised.

In fact, Japan has long been one of The Coca-Cola Company’s fastest-moving and most inventive markets. Coca-Cola in Japan released about 100 new products into the market last year alone. Some are brand new, others are fresh flavours and variations of popular favourites from years past.

“The Japanese consumer is very prompt to react very quickly to trends and to try new things,” said Khalil Younes, executive vice president of marketing and new businesses at Coca-Cola Japan. “In terms of what the Japanese are looking for, it’s some kind of… differentiation.”

In the buzz of the world’s third-largest economy (behind the U.S. and China), Coca-Cola Japan is vying for drink-lovers’ attention in virtually every drink category. Japan is famous for its futuristic mindset balanced by rich cultural tradition and the Japanese style of innovation (“kaizen”) presses forward-thinking companies and individuals to develop new products with a keen sense of both urgency and thoroughness.

Khalil Younes explains the vision of Coca-Cola Japan, which puts a heavy focus on product innovation in The Coca-Cola Company’s second-largest market. One of the current trends in Japanese beverages are drinks that contain have added health benefits.

When you look at the Japanese culture of consumption, it isn’t a surprise that some of the company’s biggest sellers in the country are tea, bottled water, sports drink and coffee brands. In fact, Khalil said that having a range of choices is more than a smart move if you want to compete in the drinks industry in Japan; it’s a requirement.

Culturally, there are more entrenched and segmented associations between drink choices and daily occasions than in the western world, so Coca-Cola Japan wants to offer an option for every time of the day.

“When it comes to, for instance, eating a Japanese meal—let’s say sushi and sashimi—then you have to have a green tea,” said Khalil. “If you’re eating a more oily type of meal, which could be like Chinese cuisine or something that has a little bit more fat, then you need an oolong tea.”

Tea is immensely popular in Japan, making up approximately 27 per cent of the country's beverage business in 2016, according to beverage research institute Inryo Soken. And like the drinking habits of the Japanese people, the tea category itself is highly segmented. Green, oolong, black, blend and FOSHU (Food for Specified Health Use)—a distinction approved by the Ministry of Health, Labour, and Welfare—teas are all very popular depending on the situation.

“There’s a much more developed understanding of tea and the benefit of teas in Japan compared to the western world,” said Khalil.

But that doesn’t mean drinks that are more popular in the west aren’t seeing a boom, too. Coffee sales are led by Coca-Cola brand Georgia Coffee and is the business unit’s second-fastest growing category, trailing only bottled water.

According to Khalil, Georgia Coffee exploded when rapid urban reconstruction and expansion of mass transportation in Tokyo collided with the success of the vending machine business in the 1960s and 1970s.

As blue-collar workers commuted to the city in the early mornings, ready-to-drink coffee became, quite literally, a hot commodity. Consumers could order it from the machine cold if they wanted, but they could also order it piping hot, and the steel (now aluminium) can could retain the heat for hours.

After its launch in 1975, Georgia Coffee became known as the 10 a.m. break drink, and the slightly sweetened coffee-milk combination became the ideal on-the-go beverage for the working man.

Now the brand has expanded, selling various styles and flavours, including zero sugar, low-sugar and milk blend drinks.

“It is fascinating to see how the Japan ready-to-drink coffee market has evolved over the last 50 years,” said Stan Mah, representative director and president of research and development, Coca-Cola Japan. “It started as a simple, 190-millilitre, sweetened, milky, coffee can product, and has evolved to cover a variety of tastes.”

Another fast-growing trend in Japan are drinks that have added benefits.

Most recent studies and measurements have found Japan to have the world’s largest aging population—according to a 2015 census, Japanese people who are 65 and older account for 26.7 per cent of the country’s total population. That’s a 3.7 per cent increase from 2010. The number of people living in welfare facilities for the elderly also ballooned to 1.69 million, a 40 per cent increase from the previous census in 2012.

“Fat control, blood sugar regulation, gut regulation—they are looking for drinks that help them control the body that is getting a little bit older,” said Khalil. “So we observe that these drinks with enhanced functionality are actually becoming more and more popular with this aging population.”

Coca-Cola Plus hit the market in March, and is the first-ever Coca-Cola approved as FOSHU by the Japanese government. This classification refers to foods containing ingredients with functions for health that are officially approved to claim physiological effects on the human body. The business unit also launched a new Aquarius product that contains 1,000 mg of Vitamin C.

But Coca-Cola Japan’s health-focused drinks aren’t just for older consumers. Well-being has major appeal for young people, too. In 2014 a study found named Tokyo the most sleep-deprived major city in the world. Two years later, Coca-Cola Japan launched glaceau sleepwater.

It’s a flavoured, night time refreshment containing theanine, an amino acid first found in green tea that is thought to reduce anxiety and improve sleep. In a country that is notorious for its long working hours and competitive spirit, products with sleep-inducing effects can fill an important need for hard-working professionals.

“The nation is trained and has the expectation that everything can be progressed,” said Khalil. “Everything can be perfected.”